Mr V RAGHUNATHAN writes in the Economic Times “I recall waiting for somebody in Beijing once for 20 minutes on a street and during this short interval, saw one wall of a whole floor of a building rising up, as the cranes moved huge pre-fabricated blocks in place incessantly. May be, that is why in the time that it took Bangalore to build its Indira Nagar flyover, Beijing got ready for the entire Olympics”

Allow me to take brief curse of this article by Sameer Sharma in Economic Times.

“What do IAS officers do?” they do ruin the taxpayers money to their home of course there are few who do less ruin but it is a ruin! In Economic terms it is killing millions of people life.

“The most common normative guide is found in the rational decision-making model, which starts with goal identification based on a known singular public interest, followed by listing of all possible alternatives with their consequences, and finally selecting the alternative, most likely to lead to goal achievement”.

I ask how many IAS officers as of now had have listed the private sector participation (education, health, road, infra, etc) in the public policies as one of the best possible option to provide better choices to people of this country.

“L P Singh advised trainee IAS officers: “practically all government is politics — anything you do has political implication”.Actually it is the political murder!

“Adopting practices from the private sector” nonsense why there are no national or state level emphases on dying poor schools and health centres etc in India

“Political engagement is necessary because decisions made by IAS officers affect individuals, groups of people and interest groups, each having different goals and different notions to achieve their goals”. When both political and IAS officers are in vested interest what will happened to people of this country. Exactly that was happening since political independence!

How many are poor too many why no one knows the reasons!

Why poor are poor because they are poor this is what stupid babaus, polize, regulators, rulers, etc preach mindlessly.

But things are not over, yet comes the age of technology and innovation to push back State Accumulated Interest (SAI)!

Exactly two years ago I had attended a Conference at Srinagar organized by ISS. What I was felt after the conference was that all sort of “isms” are becoming stuck.

Here is evidence from expert who writes in Economic Times “After 2000 which brought both corporate and customs duties within the divisible pool of taxes the amount to be shared with states was increased from 29.5% to 30.5% by the XIIth Finance Commission for the period 2005-2006 to 2009-2010. However, as pointed out by other analysts, the Union receipt budget suggests the devolution over the past five years has never exceeded 26% and in fact it has gone down from 28.2% in some earlier years to 26%. Substantial accruals arising from surcharge, cess and non-tax revenue have been kept out of the divisible pool. This has resulted in by-passing the recommendations of the Finance Commission to the disadvantage of the states. The Finance Commission need to ensure that governments implement what they accept in letter and spirit. There is the need for greater transparency and a redressal mechanism for the states”.

No matter how the road commission’s recommendation has gone beyond the spirit! This one proof is enough to say federalism is becoming stuck.

Here is an interesting article by Shoba Narayan in MINT which asks several questions and finds some answers from economists that is too from conservatives but Hayek is not a conservative! Indeed he is true liberal.

“The question needs to be rephrased. Why do middle-aged parents choose to acquire a pet? And here comes the masochistic part. For the children — because pets teach children responsibility; pets will help them take care of one another, be compassionate towards other species and eventually save the earth. The simple act of getting a pet will reduce global warming; or at least stop the glaciers from melting. Or so we think. The reality is that kids are programmed to shrug off responsibility. They lose textbooks, forget mid-term exams, forget favourite (and expensive) toys at faraway birthday parties and treat a pet as another plaything. Sure, they will fill up water in the bowl once, maybe twice. After that, pets fall under the purview of the same beleaguered parents who were foolish enough to think that they could pass the buck.

Since my husband thinks economics delivers the answer to most questions, I did a search on “the economics of intangible objects”, reasoning that pets offer only intangible benefits. This led me to Adam Smith, who offered a fascinating discourse on the topic of “vendible commodities”, but didn’t quite address the issue of pets. After several detours into “assertive modesty” and the economics of intangibles; into the meaning of “disposition”, ranging from progressive and conservative, I finally hit upon two gentlemen called Friedrich Hayek and Michael Oakeshott. The former, a Nobel-prize winner, is hot stuff among economists, but it was Oakeshott’s essay,On Being Conservative, that gave me answers to my questions.

Oakeshott talks about how a conservative mindset regards change and innovation.

“Innovation,” he says, “entails certain loss and possible gain, therefore the onus of proof to show that the proposed change may be…beneficial rests on the would-be innovator.” The problem is that the would-be innovators in my household, aka kids, didn’t use this logic with respect to the dog. There was no onus of proof; only mere badgering and endless repetition of “we want a puppy”.

Oakeshott, not surprisingly, prefers a slow rather than rapid pace with respect to innovation. In other words, get a goldfish before a puppy. He also says that the “most favourable occasion for innovation is when the projected change is most likely to be limited to what is intended and least likely to be corrupted by undesired and unmanageable consequences.” Yes, but what if the change agents didn’t have a clear view of what was intended from the change and instead got themselves mired in all kinds of unmanageable consequences, such as having to turn down all party invitations because the puppy is howling? Clearly, Oakeshott hadn’t thought that far ahead; or perhaps he hadn’t encountered irrational kids — or pups — when he came up with his clearly outlined theses”.

Quite revealing article by Professor Deepak Lal writes in today’s Business Standard that the “economists have found many anomalies in the standard economic model of an individual’s maximising utility……current consumption depends on past consumption but not future consumption. This omission is repaired in the rational addiction models of Becker and Murphy (Journal of Political Economy, 1988). They show how even with inter-temporally inconsistent preferences, consumers maximise utility over their life cycle taking account of the future consequences of their actions in consuming addictive substances.

Nevertheless, Prof Sen always try to make mockery this one is no surprise for me. Prof Lal further writes “this is justified by moral paternalists by basing themselves on Mill’s correct argument against a person’s freedom to sell himself into slavery, namely that “the principle of freedom cannot require that the person be free not to be free. It is not freedom to be allowed to alienate his freedom” (On Liberty, Everyman edition, p. 158). Amartya Sen (FT, 11 Feb, 2007) has claimed the smoking ban in the UK is based on Mill’s principles of liberty: “as habit-forming behaviour today restricts the freedom of the same person in the future”. But as I and others pointed out, this is a complete travesty of Mill’s argument against slavery (FT, 15 Feb 2007, and especially S Simpson, FT, 2 March 2007). Mill’s robust arguments against bans on addictive substances like alcohol and opium do not mention his argument against slavery as being relevant in any way”.

Monday, September 29, 2008

Philosopher Ayn Rand wrote in her book The Virtue of Selfishness that every individual own their soul, mind and body to pursue the objective their life.

Today’s TOI editorial asks “Does the fundamental right to property also guarantee the right not to have property?” “Logically then, the fundamental right to life should also incorporate its opposite” it add.

Interestingly it mentioned that “the Bombay high court thought so too in 1986 when it held that the right to life included the right to die and struck down Section 309 of the Indian Penal Code which providespunishment for the attempt to commit suicide as unconstitutional”.

One may ask how many farmers are punished so far for attempt to commit suicide.

But economist like Sauvik Chakraverti says that “the government has no role in individual’s soul to dictate” But he writes “those in authority have sold their souls to the Devil”.

One can also ask where the Devil is now. The answer may be is the governments department.

The N Deal is over, whether Dr Singh party will get vote in the forthcoming General election? It is a big dilemma because except this N deal what his party did in the account of India’s reforms is also another big question that everyone now asks utterly.

A layperson or common man can ask what are the benefits that future India will gain out this N Deal yes here is an article by Jeff Immelt in Bloomberg which precisely says it will be immense! And it is also worth to note the below lines.

“The agreement is good for the U.S.-India relationship, good for global energy policy and security and good for U.S. jobs. It opens up prospects for U.S. companies to supply potentially billions of dollars worth of reactor technology, fuel and other services to India -- especially given the ambitious nuclear-plant construction program planned by India. About 30 domestic and foreign-supplied reactors may be built by 2030 alone.”

Klein wrote “that Friedman acted as "adviser to the Chilean dictator."…… in fact, Friedman never worked as an adviser to, and never accepted a penny from, the Chilean regime. He even turned down two honorary degrees from Chilean universities that received government funding, because he did not want to be seen as endorsing a dictatorship he considered "terrible" and "despicable." He did spend six days in Chile in March 1975 to give public lectures, at the invitation of a private foundation. When he was there he met with Pinochet for about 45 minutes and wrote him a letter afterward, arguing for a plan to end hyperinflation and liberalize the economy. He gave the same kind of advice to communist dictatorships as well, including the Soviet Union, China, and Yugoslavia”.

Economist Dr Subroto Rowrites in Business standard “India has followed in peacetime over six decades what the US and Britain followed during war. Our vast growth of bank deposits in recent decades has been mostly a paper (or nominal) phenomenon caused by unlimited deficit finance in a fractional reserve banking system. Policy makers have widely misinterpreted it as indicating a real phenomenon of incredibly high savings behaviour. In an inflationary environment, people save their wealth less as paper deposits than as real assets like land, cattle, buildings, machinery, food stocks, jewellery etc”.

It is also quite interesting to note the India’s money, income and prices situation since 1935-2008.

If you see the second graph growth of money supply exceeds both growth of wholesale prices and the real income.

Friday, September 26, 2008

Mr C.T.Kurienwrites “In India road construction is the highest contributor to poverty reduction and in China it is government expenditure on education that makes the largest contribution in reducing rural poverty”.

Further the “Spending on rural infrastructure is another top contributor to poverty reduction in most countries studied. Expenditures leading to increased non-farm employment are also major contributors to poverty reduction”.

In fact “in Thailand the major contribution to poverty reduction has come from investments in rural electrification”

Better the NREGS should be scraped instead the money should be spend on building infrastructure in rural and urban areas.

Mr Sarbjit Dhaliwalwrites in the Tribune “Have you seen any politician getting himself treated in a government-run primary health centre or in a civil hospital at the district or divisional level?”

Genuine question.

It is true that “Most politicians of Punjab have their “kothis” in Chandigarh or in other well-known cities such as Ludhiana, Jalandhar, Amritsar and Patiala having good quality private, convent schools”.

Further “politicians and bureaucrats at a personal level have already rejected the public delivery systems comprising government schools, civil hospitals and public transport and they opt for other better alternatives for which they have the financial means to utilise”.

The real question comes where is the choice for poor people who are now forced to chose only bad governments services in schools, education etc.

“Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. ... To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection--a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. ...It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression. We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.”

H.D.S. Greenwaywrites in Boston Globe “there are ironies heaped on ironies….the United States has touted free markets as the holy grail, and even liberal democracies have been excoriated by Washington for not wringing out their last vestiges of socialism. Today, however, much of the US economy is about to be run by the central government, which is supposed to be where socialism went wrong. Today, China is looking to the United States for inspiration on what to nationalize rather than privatize”.

There is enough wolf cry on the buzzed word of “bailouts” and many free market economists have expressed their positive signal.

Economist Raghuram Rajan, finance professor at University of Chicago's Graduate School of Business and former chief economist with the International Monetary Fund, said “the government had rushed to spend public money without trying all the private sector solutions”.

Resources do not disappear, they get reallocated. The market process is a mechanism for the continual re-evaluation and re-shuffling of scarce resources among alternative uses. This is what is meant when we refer to the market as a dynamic process of entrepreneurial discovery and learning.

As I said here, terribly there is a need for private property right not just but constitutionally.

Economist Thomas Sowell writes, “What property rights provide, in countries where these rights are readily accessible, is the ability of people to convert physical assets into financial assets, which is turn enables them to create additional wealth, whether individually or in combination with others. Property rights enable strangers to cooperate in economic ventures, some of which are beyond the means of any particular individual and must be undertaken by corporations which can mobilize the wealth of thousands or even millions of people, who cannot possible all know each other. Moreover, property rights provide incentives to monitor their own economic activities more closely than government officials can-and protects them from the over-reaching caprices or corruption of such officials. In short, property rights are an integral part of a price –coordinated economy, without which that economy cannot function as efficiently” (Applied Economics Thinking Beyond State One, p. 200-201).

Here is an events by Delhi based Liberty Institute. I am posting the whole programme below.

Liberty Institute

and

International Management Institute

In partnership with

Friedrich Naumann Stiftung - für die Freiheit

Cordially invite you to

A roundtable on

Property Rights: The Sin in Singur

Panelist:

Sanjiv Agarwal, businessman and Good Governance India

Biswajit Bhattacharya, advocate, Supreme Court of India

Bibek Debroy, International Management Institute

Ashok Desai, economist and columnist

Paranjoy Guhathakurta, journalist

Rajiv Kumar, International Council for Research on International Economic Relations

There is a great event on “Opportunities for Liberalism inIndia”. Given the present crisis it would be right time to muse about the words like liberty, individual freedom, economic freedom etc because without which human being hardly believe there is life.

Please do attend. I am posting the whole programme below.

Symposium

Opportunities for Liberalism inIndia

Organised by the Friedrich-Naumann-Stiftung für die Freiheit

At the occasion of

50 Years Friedrich Naumann – Stiftung für die Freiheit

and

40 Years of Project Work inIndia

NewDelhi,27 September 2008

Venue:

Federation of Indian Chambers of Commerce and Industry (FICCI)

Federation House, Tansen Marg,New Delhi110001

The cornerstones of a vibrant democracy need a constant screening, because democracy is always in danger of slowly declining unnoticed. Central to democracy is the trust in individual freedom and responsibility. There is no freedom without rule of law, economic freedom, peaceful resolution of conflicts and equality of opportunities. These are also the core liberal values.

How much freedom of speech and thought is ensured to the citizens ofIndia, considering the current threats to religious minorities in many place of the country? How does the Indian state try to resolve its many violent conflicts, for instance the most serious one with the Naxalites? How does the state tackle the threat of terrorism? What is left of the licence and inspector raj inIndia, which affects growth rates and millions of people’s jobs?

We invite you to have a closer look at “Opportunities for Liberalism inIndia” and be part of the discussions with distinguished speakers such as Soli J. Sorabjee, B. G. Verghese, the German Ambassador H. E. Bernd Mützelburg, Prof. Bibek Debroy, Arun Jaitley, MP, Sharad Joshi, MP, and John Lord Alderdice, MP (Britain), and President of Liberal International.

Friedrich-Naumann-Stiftung für die Freiheit (FNF) is the German foundation for liberal politics and the only liberal organisation if its kind world-wide. We lend our expertise for endeavours to strengthen freedom, democracy, market economy and the rule of law. The symposium commemorates 40 years of our partnership with Indian civil society actors.

“Jacques J J Soudan, pointed out, “These days you have to pick up your dog’s droppings. Yet, you still pay this tax, perhaps for the noise pollution!”

And further

“Simon Hamer, from UK, has the last word: “I’m absolutely wholly against inheritance tax, you save all your life to look after your kids’ futures, only to have a huge lump of it taken away by the taxmen”who don’t productive as you and I can.

For instance just see “According to the September 30, 2007 status report of the Ministry of Programme Implementation, out of 897 projects, 276 suffered cost over-runs with an anticipated cost of Rs 1,42,227 crore as against the original estimate of Rs 95,913 crore, which is a 48 per cent increase!”

Thursday, September 25, 2008

Here is an article says that the “US took way back in 1944 hot on the heels of World War II when together with its staunchest ally, the UK, it established the Bretton Wood twins and urged the world to adopt its currency as the international referen ce currency in exchange for an ounce of gold for every $35 surrendered” further “US dollars — domestic and offshore. At a rough estimate, one reckons that the quantum of the US dollar in circulation in the offshore market at any given point of time can easily rival that in circulation in the domestic market”.

In fact it is true that “China by deliberately following the policy of keeping its currency devalued with a view to facilitating its export-led growth and the US through its policy of offering its currency as the international reference currency”.

In today’s Indian Express Columns Saubhik Chakrabarti writes “The labour minister was being hypocritical or ignorant when he made that statement, and he will get away with it because the political class prefers hypocrisy and ignorance on this issue”.

But still he wanted a responsible reply to the bad incident that happened in Greater Noida CEO death.

“He should tell us what kind of warning India’s labour leaders should receive”.

It is a “must read for anybody interested in economics”.. said my friend Jayakamal in his mail to me.

There are two interesting good notes:

Gertrude Himmelfarb writes “Like all moral lapses, this one started on a slippery slope: the relegation of notes to the back of the book. And, like all such lapses, this one has a venerable precedent. It was in 1754, in his "Discourse on the Origin and Foundations of Inequality Among Men" (familiarly known as the "Second Discourse") that Jean-Jacques Rousseau appended to the preface an ominous "Notice on the Notes":

"I have added some notes to this work, following my lazy custom of working in fits and starts. These notes sometimes stray so far from the subject that they are not good to read with the text. I have therefore relegated them to the end of the Discourse, in which I have tried my best to follow the straightest path. Those who have the courage to begin again will be able to amuse themselves the second time in beating the bushes, and try to go through the notes. There will be little harm if others do not read them at all."

Richard Ebeling's excellent comment, “economist will step up to the plate and speak out in defense of allowing the market to correct and recoordinate in this time of financial crisis, the answer is: most likely no one”.